Czech Republic: Referral to CJEU of issue relating to VAT exemption for supplies of goods to another member state

The Supreme Administrative Court (SAC) has referred a preliminary question to the Court of Justice of the European Union (CJEU) whether it is possible to deny the right to value added tax (VAT) exemption for supplies of goods to another EU member state if the supply to a specific customer is not proved.

The taxpayer supplied rapeseed oil to businesses in Poland, declared the related transaction in its VAT return as a supply of goods to another member state, and applied the VAT exemption with right to deduct.

Following the commencement of a tax inspection for the period of February to May 2015, the tax administrator stated that the company had not proven the supply to the entities designated as the recipients of the goods. According to the tax administrator, there was no doubt about the goods having actually been transported to Poland, but the supporting documentation did not fully match the data reported by the company. At the same time, the reported recipients did not declare the acquisition of goods from the Czech Republic and the related VAT in their Polish VAT returns. The tax administrator subsequently assessed additional output VAT on these transactions.

The case had already been dealt with by the SAC, and has now been reopened after additional evidence was added. Referring to the recent judgment of the CJEU in the Kemwater ProChemie case, the court dealt with whether its conclusions can be applied by analogy to the case under consideration. In particular, the court considered whether the VAT exemption should be maintained if no specific recipient is identified, and the facts of the case imply that the goods were supplied to another taxable person (VAT payer). In this respect, the SAC also drew attention to the fact that the goods were apparently supplied to other VAT payers, as these were transactions amounting to tens of thousands of euros.

In view of the contradictory domestic case law, the SAC referred to the CJEU the preliminary question as to whether the conclusions of the Kemwater ProChemie judgment could be applied by analogy also for the purpose of maintaining the VAT exemption for supplies of goods to another member state if the specific recipient is unknown. The CJEU has yet to assess the case.

Note that the case deals with a situation from before the “quick fixes,” i.e., before the supplier's obligation to declare supplies to another member state (including the customer’s VAT ID in the EU sales list) to maintain the VAT exemption. It is thus questionable whether any favourable conclusions of the CJEU could be applied to transactions taking place at a later date. 

Read a January 2023 report prepared by the KPMG member firm in the Czech Republic